Taiwan industry output seen to shrink in July on poor export orders

SINGAPORE (ICIS)--?xml:namespace>Taiwan’s industrial production is expected to contract in July as export orders declined, including those of petrochemicals, analysts said on Tuesday.

“Industrial production [in Taiwan] should continue to show a high correlation with export orders and exports,” Singapore-based DBS Group Research said in a note to clients.

DBS Group expects Taiwan’s overall industrial production fall by 1.4% year on year in July, while Singapore-based UOB Economic-Treasury Research forecasts a slightly bigger contraction of 1.6%.

In June, Taiwan’s industrial output shrank by 2.44%. Official industrial production data for July is expected to be released on 23 August.

“A weak output growth in July, if confirmed, will bode ill for the GDP outcome in the third quarter,” said DBS Group Research.

In the second quarter, Taiwan’s economy shrank for the first time in nearly three years, recording a 0.18% year-on-year contraction because of weak exports.

Its government has lowered its 2012 GDP growth estimate to 1.66% for the full year from a previous forecast of 2.08%.

Taiwan’s overall export orders fell by 4.39% year on year to $35.9bn (€29bn) in July, marking its fifth straight month of contraction, according to statistics released by Taiwan’s Ministry of Economic Affairs on Monday.

For chemicals, export orders fell by 18.9% year on year to $1.68bn for the period, representing a steeper decline than the 7.23% fall seen in June. Textile products, meanwhile, registered a 5.42% increase to $1.09bn for the same period.

Taiwan’s petrochemical major Formosa Petrochemical Corp (FPCC) reflected the weak external demand, as its sales declined 18% year on year to NT$63bn.

Overall orders from China and the eurozone – the island’s biggest export markets – fell by 5.51% and 5.8%, respectively, in July, official data showed.

“This is in line with the weak performance in [the] global economy and in the electronics industry. July PMIs [Purchasing Managers’ Index] in China, US and Europe remained well below the neutral levels,” said DBS Group Research.